Connecticut Plans to Cap Wholesale Gas Tax

HARTFORD, Conn. -- With gas prices continuing to rise (the national average price for a gallon of gasoline rose for the 10th straight day on Monday to $3.842), Connecticut's state lawmakers are announcing plans to provide relief at the pump and add protections against price gouging.

The six-point plan, released by Democratic leaders Monday, includes provisions to cap the fluctuating gross receipts tax rates on wholesale gasoline that costs $3 or more per gallon and to give the attorney general and Department of Consumer Protection commissioner additional authority to impose fines on distributors found in violation of profiteering laws, according to a Bloomberg report.

The gross receipts taxes at a rate of 7.5 percent for each dollar of wholesale gas. Although this tax is imposed on wholesalers and distributors, it affects the overall cost at the pump. This rate is expected to increase in 2013, according to the report.

Additionally, the Democratic plan calls for an amendment to the petroleum profiteering statute to further protect against price gouging and to include the proposed protections on home heating oil prices.

The plan does not affect the fixed state tax on gas.

Under the proposal, the cap would end in June 2013, at which time they would re-evaluate the cap, said Democratic leaders.

Senate President Pro Tempore Donald Williams Jr., said the plan would give the state many tools to guard against future price gouging by gasoline wholesalers. He and other Democrats blamed speculation on Wall Street as the reason behind recent increases in gasoline prices, saying there are no issues or interruptions in the products' supply or demand.

Majority Leader Rep. Brendan Sharkey, said the tax cap would force the state to live within its means, as it could lose revenue going into the general and special transportation funds.

"We don't want to benefit from rising gas prices in terms of increased revenue to the state," he said. Democrats did not say specifically how much money Connecticut residents could save under the plan. They said the proposed cap would freeze the gross receipts tax at $3 per gallon rates for wholesale gas, meaning if the price rises above this, the tax does not increase. Under the proposal, wholesale gas that falls below the $3 price point would not be affected by the cap.

If the wholesale price dips below $3 per gallon, however, the tax rate does, as well. The gross receipts tax on gas is expected to increase to 8.1 percent in 2013. The current wholesale gas price stands at $3.18 per gallon, according to the Bloomberg report.

With the new bipartisan support on the measure, the bill could potentially pass as emergency legislation by the end of the week.

A spokesman for Gov. Dannel P. Malloy said the governor supports the concept of the tax cap and looks forward to reviewing the legislation.

According to AAA, the average price for regular unleaded gasoline in Connecticut is slightly above $4 a gallon -- up 27 cents from last March and almost 20 cents above the national average, which AAA pointed out is only 6.6 percent below the record high of $4.114 set in July 2008.

Gasoline averages more than $4 a gallon in seven states: Alaska, California, Connecticut, Hawaii, Illinois, New York and Washington, according to AAA. Gas prices are also above $4 a gallon in the District of Columbia. At more than $4.48 a gallon, Hawaii ranks as the nation's high. Prices are less than a dime away from $4 a gallon in Michigan, Nevada, Oregon and Wisconsin.

Wyoming has the nation's lowest gas prices, averaging slightly above $3.43 a gallon.

The impact of gas taxes on what consumers pay at the pump was starkly illustrated by the New York Post last weekend, which ran an article showing that drivers in New York State pay more gas taxes per gallon than anywhere else in the nation. According to the American Petroleum Institute, New York beat out California and Connecticut for the dubious honor.

Additionally, drivers in New York City and its suburban counties are hit with additional levies at the pump, making their gas taxes the highest in the country. The average $4.04 per gallon price of regular gas in New York City includes 69 cents' worth of federal, state and local taxes. The gas station, on average, receives only 22 cents per gallon of the price. However, that 22 cents is further reduced by the cost of overhead, including high credit-card processing fees, so that typically retailers make about 3 cents per gallon.

According to the Post, the per-gallon breakdown of a gallon of gas in New York City comes to:

Federal Tax: 18.4 cents
State Petroleum Business Tax: 17.8 cents
State Motor Fuel Excise Tax: 8 cents
State Petroleum Testing Fee: 0.05 cents
State Spill Tax: 0.3 cents
State Sales Tax: 8 cents
City Sales Tax: 16.9 cents
TOTAL TAXES: 69.45 cents

Refiner: 23 cents
Delivery: 2 cents
Gas station: 22 cents
Oil Company: $2.88

Rising gas prices has become a hot political issue during the presidential campaign. A recent Washington Post-ABC News poll reported that more people disapprove of how President Obama is handling the economy than a month ago.

Republican candidate Rick Santorum has blamed the president for blocking the expansion of domestic energy production. Santorum has also argued that high gas prices were to blame for the 2008 housing meltdown and ensuing economic slump.

And Republican front-runner Mitt Romney said recently that Obama "should be hanging his head" over his energy policies and also accused the president of slowing domestic production. Romney has advocated opening federal lands to drilling and easing regulations on fracking, a hotly debated technology that that involves pumping water into rocks to harvest gas.